29 March 2012

Macroeconomics and water management

The values and choices of economic actors -- like the values and choices of water users -- are too complicated to understand or manage. That doesn't mean that central bankers and water managers do not try to do so, often with poor results.

The economy, like a water system, needs to operate with simple rules that constrain total behavior within limits (e.g, the money supply and the water supply) without being either over-prescriptive on "acceptable actions" or over-optimistic on how people will behave. The former reduces our prosperity. The latter leads to nasty financial destruction (or water shortages).